Vince Cable: Futures markets are a model of transparency

Vincent Cable, the Liberal Democrat shadow Chancellor, has said the exchange-traded futures industry serves as a model of transparency for the effective running of financial markets.

Vincent Cable, the Liberal Democrat shadow Chancellor, has
said the exchange-traded futures industry serves as a model of
transparency for the effective running of financial
markets.

In an interview with FOW ahead of
tomorrow’s (6 May) UK general election, Cable said
he foresaw no need of radical reform in the listed derivatives
markets.

"In general, the commodities and other futures markets have
led the way in showing how financial markets should operate,"
he said.

"Specifically, the transparency of exchange-traded futures
should be seen as example to be followed by other markets, in
particular for credit default swaps", added Cable, who served
as chief economist at Shell, the largest London-listed company
by revenue, in the 1990s.

Criticising his rivals in the run up to
Thursday’s general election, Cable said: "Labour
has repeatedly refused to tackle the structural problems in the
banking sector, and the Conservatives are unwilling to make
reforms without international agreement."

In response, a Conservative spokesperson pointed out their
party’s manifesto commitment to a levy on banks,
and the party’s promise to act unilaterally if
necessary. A spokesperson from the Labour party was not
immediately available for comment.

Cable said the Liberal Democrats would seek to "separate
high-risk investment banking and low-risk high street banking"
should they gain power, echoing the sentiment of the
far-reaching financial reform bill now being debated in the US
Senate. He also lent tacit support to the Senate Agricultural
Committee’s proposed amendment to the bill, which
effectively bans deposit holding banks from proprietary trading
of derivatives.

"This would likely be the natural result of splitting
low-risk retail banking and high-risk investment banking", said
Cable. "The taxpayer should never again be expected to foot the
bill for the reckless gambling of 'casino’
bankers."

Asked what he would do about an inevitable City backlash in
response to such changes, Cable was philosophical.

"The financial crisis must make us look critically at the
City’s contribution. There are considerable
benefits from the City, but, as we have now discovered, major
systemic risks which can spill over into the rest of the
economy. It is the job of policy makers, and specifically
regulation, to cut the risks relative to the benefits."

He concluded that: "I know that many in the City have been
horrified by the path their colleagues and rivals trod in
recent years and it is by no means certain that there would be
a 'backlash’. My approach to the City is not one
of hostility, or of obsequiousness. I recognise its importance.
But we must ensure that the banking sector can never put the
stability of the UK economy at risk."